On September 22, 2015, the European Securities and Markets Authority (ESMA) published a speech, given by Steven Majoor, ESMA Chair, on the regulation and supervision of the derivatives market.

Points of interest in the speech include the following:

  • In 2016, the bulk of ESMA’s work to create the single rulebook resulting from post-crisis regulatory reform will have been completed. In line with its 2016-20 strategy, ESMA’s focus will shift to implementation. It will allocate more resources to supervisory convergence activities, and reduce resources for single rulebook activities.
  • ESMA is currently working to finalize a number of rulemaking aspects under EMIR (European Market Infrastructure Regulation – the Regulation on OTC derivative transactions, central counterparties and trade repositories, Regulation 648/2012) relating to the clearing obligation. ESMA will continue to address the possible challenges that market participants (particularly smaller counterparties) can face in establishing clearing arrangements.
  • ESMA has, compliant with the embedded requirement for ongoing review of the operation of EMIR, already issued four reports dealing with the systemic importance of non-financial counterparties, pro-cyclicality, collateral margining and the arrangements relating specifically to segregation and portability of client collateral, and commenting on issues which have arisen to date in the implementation of EMIR e.g. the process of recognition of third country central counterparties.
  • Since the trade reporting system imposed by EMIR has been up and running there have been no “major hiccups” in terms of reporting flows and connections with trade repositories and regulators, albeit ongoing work is required in relation to data quality.
  • The “OTC Derivatives Union” achieves a high level of consistency across the EU, both in terms of regulation and supervision. As a consequence, it provides a positive model for establishing an EU-wide Capital Markets Union.